Additional Tax Filing Extensions: Relief For Storm-Weary Californians

On February 24, 2023, the IRS issued News Release IR-2023-33 which extended the deadline for filing tax returns and other tax-related actions to October 16, 2023, from the previous extension date of May 15, 2023, for most California counties. The extensions apply to taxpayers living or having businesses in the counties listed below, regardless of whether they actually suffered storm-related damage.

Background

On January 10, 2023, the IRS issued CA-2023-01 which, as updated, extended until May 15, 2023, the deadlines for tax returns and other tax-related actions with deadlines occurring after January 8, 2023, for taxpayers and businesses residing in the following California counties (Covered Disaster Area): Alameda, Colusa, Contra Costa, El Dorado, Fresno, Glenn, Humboldt, Kings, Lake, Los Angeles, Madera, Marin, Mariposa, Mendocino, Merced, Mono, Monterey, Napa, Orange, Placer, Riverside, Sacramento, San Benito, San Bernardino, San Diego, San Francisco, San Joaquin, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, Solano, Sonoma, Stanislaus, Sutter, Tehama, Tulare, Ventura, Yolo, and Yuba counties.

Then on January 24, 2023, the IRS issued CA-2023-02 which, as updated, extended until May 15, 2023 the deadlines for tax returns and other tax-related actions with deadlines occurring after December 27, 2022, for taxpayers and businesses residing in the following California counties (Covered Disaster Area):  Alameda, Alpine, Amador, Butte, Calaveras, Colusa, Contra Costa, Del Norte, El Dorado, Fresno, Glenn, Humboldt, Inyo, Los Angeles, Madera, Marin, Mariposa, Mendocino, Merced, Monterey, Napa, Nevada, Placer, Sacramento, San Benito, San Joaquin, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, San Diego, San Francisco, Siskiyou, Solano, Sonoma, Stanislaus, Sutter, Tehama, Trinity, Tulare, Tuolumne, Ventura, and Yolo counties.

CA-2023-01 and CA-2023-02 have now been updated to extend the filing deadline from May 15, 2023 to October 16, 2023.

Affected Taxpayers

Affected taxpayers eligible for this extension (Affected Taxpayers) include individuals who live, and businesses (including tax-exempt organizations) whose principal place of business is located, in the Covered Disaster Area. Taxpayers not in the Covered Disaster Area, but whose records which are necessary to meet a filing deadline are located in the Covered Disaster Area, are also entitled to relief.

Tax Returns and Estimated Payments

Affected Taxpayers now have until October 16, 2023 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; annual information returns of tax-exempt organizations; and employment and certain excise tax returns), that have either an original or extended due date occurring on or after December 27, 2022 (for CA-2023-02) or January 8, 2023 (for CA-2023-01), and before October 16, 2023.  This includes 2022 individual income tax returns due on April 18, as well as various 2022 business returns normally due on March 15 and April 18, 2023. Among other things, this means that Affected Taxpayers will have until October 16, 2023, to make 2022 contributions to their IRAs and health savings accounts.

Affected Taxpayers that have an estimated income tax payment originally due on or after December 27, 2022 (or January 8, 2023), and before October 16, 2023, will not be subject to penalties for failure to pay estimated tax payments as long as such payments are paid on or before October 16, 2023.  The October 16 deadline, therefore, applies to the quarterly estimated tax payments normally due on January 17 and April 18, 2023. This means that Affected Taxpayers can skip making the fourth quarter estimated tax payment, normally due January 17, 2023, and instead include it with the 2022 return they file, on or before October 16.

Other Tax-Related Actions

Affected Taxpayers also have until October 16, 2023, to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Revenue Procedure 2018-58.    Rev. Proc. 2018-58 describes 269 time-sensitive actions, in lists arranged by tax areas (e.g., Business and Individual Tax Issues, Corporate Tax Issues, Employee Benefit Issues, Gift and Estate Tax Issues, etc., etc.).

Of particular interest are the deadlines involved in Section 1031 like-kind exchanges.  Applying Section 6 of Rev. Proc. 2018-58, if the deadline for the 45-day identification period, or for the 180-day exchange period, falls after December 27, 2022 (or January 8, 2023) and before October 16, 2023, those deadlines are extended to October 16, 2023.  This extension applies regardless of the date the relinquished property was transferred, and is available to Affected Taxpayers regardless of whether their exchange began before or after December 27, 2022.

Section 17 of Rev. Proc. 2018-58 provides additional relief specific to Section 1031.  Section 17 generally extends relief to taxpayers who are not Affected Taxpayers (i.e., they don’t live in the Covered Disaster Area), but who nonetheless may have been adversely affected by the disaster (because, for example, the relinquished or replacement property may have been located in the Covered Disaster Area).  Relief under Section 17 is available only if the relinquished property was transferred on or before the Disaster Date (December 27, 2022 or January 8, 2023).  Any 45-day or 180-day deadline that falls on or after the Disaster Date is extended to the longer of: (i) 120 days from such deadline; or (ii) the General Postponement Date (October 16, 2023).

California Franchise Tax Board (FTB) Compliance

On March 2, 2023, Governor Gavin Newsome’s office published an announcement that California would following the extension to October 16, 2023 for all tax filing deadlines extended by the IRS.  The announcement also mentioned that PTE Elective Tax payments due on June 15, 2023 would be extended to October 16, 2023.

The Bottom Line

In January, the IRS granted relief to California taxpayers living in areas affected by the winter storms by extending most tax-related filing deadlines to May 15, 2023.  The IRS has now extended those filing deadlines to October 16, 2023.  California has announced that it will also extend tax-filing deadlines to October 16, 2023, in coordination with the IRS.